Context: Even in the UPC era, patent holders can still gain leverage through enforcement in Germany (June 27, 2024 ip fray article).
What’s new: A new decision by the Bundesgerichtshof (Federal Court of Justice) has two key implications. One, there is a possibility of seeking damages if a product deemed to have infringed a patent in Germany was promoted and such promotion resulted in foreign sales, even if the patentee enjoyed no protection in the target market in question. Two, a damages computation based on reasonable royalties is possible even if there is no established licensing practice in the given context.
Direct impact: The Federal Court of Justice reversed and remanded for further proceedings. Denmark’s EnerDry A/S had not been awarded any damages by the lower courts, but is now going to receive something, though the exact amount could vary greatly depending on case-specific facts.
Wider ramifications: This case will likely be taken note of by courts in other jurisdictions. While the fact pattern is distinct from the one in BSH Hausgeräte v. Electrolux, there appears to be a general trend toward allowing extraterritorial recovery of patent infringement damages (May 15, 2024 ip fray article).
As the Federal Court of Justice remanded the case to the Brunswick (“Braunschweig” in German) Higher Regional Court, this decision does not even put an end to a patent infringement dispute over EP1070223 (“apparatus for the drying of moist particulate materials in superheated steam”) that started ten years ago in Dusseldorf.
The Dusseldorf Regional Court sided with the patent holder and held the defendant (a German company) liable for all damages that resulted from making, offering, releasing into commerce, using, importing and owning any infringing machines. The Dusseldorf Higher Regional Court, however, narrowed the damages theories in 2017 to just the act of offering infringing machines.
In order to then seek a specific amount (approximately two million euros), EnerDry filed a complaint with the Brunswick Regional Court in 2019. That case was dismissed. In 2022, the Brunswick Higher Regional Court affirmed the rejection of the complaint.
Unlike in the U.S. where every district court can hear patent infringement claims, only a limited number of courts can do so in Germany. Brunswick is not among the top 5 or 6 venues. But the patentee apparently wanted to avoid the country’s major patent venues for its damages claim.
The Federal Court of Justice agreed to hear the case (the equivalent of a writ of certiorari in the U.S.) and announced a decision on May 7, 2024 that the plaintiff-appellee’s lawyers from the Heuking firm (you can find all the names further below) received yesterday and have just shared on LinkedIn:
The fact pattern in this case is peculiar, but the key holdings by Germany’s top court for patent cases (the Federal Constitutional Court can theoretically hear such cases, too, but only specific aspects such as violations of the right to be heard), with one UPC appellate judge (Judge Dr. Patricia Rombach) on the panel, have far-reaching ramifications and are bound to come up again in various other patent damages cases in Germany. That decision will also encourage courts in other jurisdictions to take a rather expansive view on what acts entitle a patentee to damages.
What’s truly remarkable is that the patent-in-suit had lapsed with respect to the Swedish market in 2005, and the act that is at issue here is the sale of a machine to a Swedish customer who placed an order in 2012. The machine was then built on-site in Sweden. We’re not talking about an export and not even about a German court exercising jurisdiction over the violation of the Swedish part of an EPO-granted patent (which may soon become common, depending on the outcome of BSH Hausgeräte v. Electrolux). Yet, the patentee seeks almost two million euros in damages. How is that possible?
The defendant’s problem is that it’s a German company that offered products that would have infringed the German part of the European patent-in-suit, and the act of offering them violated German patent law in and of itself. As the defendant argued, it could have sold and made that same machine without violating any of the patentee’s rights.
The Federal Court of Justice says that an act of offering a product infringing German patent rights is also capable of giving rise to a damages claim. There must be some apportionment, even more so if there were (which is not the case here) foreign patent rights that could give rise to double recovery (collecting damages over the act of offering and then also over the actual sale), but none of that means that the correct damages amount is zero.
The decision does acknowledge that patent enforcement against the mere offering constitutes thin protection. But that still doesn’t mean the patentee is not entitled to any damages. If there is a causal nexus between the illegal act and what happened afterwards (even some aftersales activities or the sale of add-ons), then there is scope for a damages claim.
Even if an industry does not have an established licensing practice, a damages claim may be based on what would constitute reasonable royalties. This is a key holding that will also impact cases without any extraterritorial component.
In this case, the patentee is now free to seek damages based on a disgorgement of infringer’s profits, its own loss of profits or reasonable royalties (whichever of the three theories it chooses). It appears that the patentee would face a high hurdle if it sought damages on the basis of a loss of profits. In that context, the patentee would have to show that it would have been likely to make the sale in the absence of the unlawful act. In that context, the defendant’s alternative options will come into play. The defendant could have made the offer only in Sweden, in which case it would not have violated the patent at the relevant time.
The plaintiff’s lawyers are from the Heuking firm, including Dr. Anton Horn (the chair of the firm’s patent litigation practice ), Birthe Struck, Dr. Sabine Dethof, and law student Kelly Sue Lankowski. For the proceedings in the Federal Court of Justice, they instructed Dr. Reiner Hall, and they teamed up with the following patent attorneys: Budde Schou’s Jan Sørensen and Henrik Sten Nielsen, and Cohausz & Florack’s Andreas Thielmann and Jan Ackermann.